Eric's blog

Germany’s Manager Magazin asserts that VW might buy Fiat-Chrysler. Ferdinand Piëch wants to re-create Auto Union and combine the VW brands Audi, SEAT and Skoda with classics like Alfa Romeo, Bentley, Bugatti, Lamborghini, Maserati, and Porsche. Along with Fiat and Chrysler it could make over 14 million cars a year, consigning Toyota and General Motors with about 10 million into second place.

In the 1930s four rings signified the creation of the first Auto Union, the amalgamation of the motor industry in Saxony. DKW, Horch, Wanderer and Audi joined up to weather financial storms following the Great Depression and face intervention from the emerging Third Reich. The State Bank of Saxony, the Allgemeine Deutsche Credit Anstalt (ADCA) and the Commerzbank of Berlin were midwives at the birth of the Auto Union.

Wanderer was the oldest, established in 1885 at Chemnitz. In 1899 August Horch set up at Cologne-Ehrenfeld, moved in 1902 to Plauen in the Vogtland, then in 1904 as a public company eastwards to Zwickau in Saxony. Third ring DKW also had roots in Chemnitz from 1904 when Danish entrepreneur, Jörgen Skafte Rasmussen established Rasmussen & Ernst GmbH in an empty textile works at Zschopau in the Erzgebirge. In 1914, as the Zschopauer Maschinenfabrik J S Rasmussen, it did military work, experimenting with a large, and as it turned out unwieldy, steam vehicle the Dampf Kraft Wagen (DKW - Steam-Power-Vehicle).

DKW persevered with motorcycles, making a primitive car in 1928, then at the 1931 Berlin motor show made a breakthrough with the first front wheel drive production car three years ahead of Citroën. FWD was novel, it was cheap, and DKW was good at it. Innovation did not bring prosperity however, and DKW was obliged to take a shareholding in Audi, making Rasmussen chairman. But by 1932 car sales in Germany had halved and DKW suffered from Rasmussen's expansionism. To make things worse, the Hitler regime planned a state-sponsored car to go on sale to the German Volk at a seemingly impossible price to savers of political tokens.

Amalgamation was complicated and it took nine months to agree terms and acquire funds. Headquarters were at Chemnitz, the Zschopauer Motorenwerke raised its share capital from 4.5 million Reichsmarks to 14.5 million and the new Auto Union AG bought the fourth ring, Wanderer, leasing its factories.

DKW's contribution of share capital was Rm10 million, Horch brought Rm500,000, Audi Rm2,500,000, and Wanderer Rm15,730,000. The new combine had a staff of 4,500 and factories at Zschopau making motorcycles and 2-stroke engines, Zwickau (cars), Berlin-Spandau (wooden body frames) and Siegmar (cars and steel bodies). Auto Union was a major player in the German motor industry alongside Adler, BMW, Opel, Daimler-Benz, and Ford. Meanwhile the cause of all the angst, the Volkswagen, was slow making its appearance.

Ferdinand Porsche’s consultancy made a submission to the Ministry of Traffic in Berlin for a car selling for Rm1500, with a fuel consumption of 8l/100 kms (35 mpg), a top speed of 100 kph (62 mph) and a weight of 650 kg (1433 lbs). Hitler and Porsche met in April 1934, at the Kaiserhof Hotel in Berlin, together with Jakob Werlin, Mercedes-Benz dealer in Munich and an early member of the Nazi Party. Werlin carried weight, joined the Mercedes-Benz supervisory board, and went on to be inspector-general of the industry.

Hitler sanctioned the VW provided it could cruise the new autobahns at 100kph, obtain a fuel consumption of 7l/100 kms (40 mpg) and sell for Rm990. A contract was drawn up under which Rm200,000 was set aside for a prototype and a production run of 50,000. The effect on the established Saxony car makers was profound but in 1935 Volkswagen was inaugurated. State intervention had been inevitable and the Auto Union’s marques Horch, Audi, Wanderer and DKW were broadly complementary. Horch made premium big saloons and tourers, Audi was distinctly middle-class. Wanderer had a solid array of good family cars and DKW lively cheap two-stroke economy models.

An urgent task was to forge the group’s identity and it took up a German state subsidy to build a 16-cylinder car designed by Professor Porsche, inaugurating a momentous period of grand prix motor racing. Mercedes-Benz and Auto Union overwhelmed all opposition in a demonstration of German technical pre-eminence, a triumph for the Reich’s propaganda machine under Dr Joseph Goebbels.

Now Automotive News Europe reports: "The simple deal logic is straightforward," London-based analyst Arndt Ellinghorst of ISI Group wrote in a note to investors. "Chrysler - better Jeep and Dodge - could fix VW's US problems; Alfa could replace the ailing Seat brand; Fiat Europe is basically the 500 product family plus LCVs. Latin America could be sold, potentially to a Chinese buyer."

Both Piëch and Martin Winterkorn, VW chief executive, are on record as showing interest in Alfa Romeo. VW had $24 billion in cash to play with at the end of March, so a takeover would be manageable. Everybody denies any such thing but Piëch, the obsessive and brilliantly successful 77 year old grandson of Ferdinand Porsche gets his way more often than he doesn’t. If VW bought the 150-strong Agnelli-Elkann dynasty's 30 percent controlling stake in Fiat-Chrysler it could be $5 billion or $6 billion richer and even keep Ferrari to bring a regular $475 million pocket money every year.
Top: Mid-engined masterpieces, Auto Union racing cars by Dr Porsche.

Audi adopted Auto Union’s four rings.

Number 1 surmounts the bonnet of an Audi Front.

Horch made some spectacular cars

DKW Sonderklasse. Front wheel drive, 2-stroke and one of my first ever test cars, borrowed from the factory in Düsseldorf in 1956. My first drive at the Nürburgring.